Trump admin to cut Medicare Part D as projected costs skyrocket

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(The Center Square) – A Biden-era health care subsidy under Medicare Part D will no longer be available in 2027, the Trump administration announced, as the costs of the prescription drug coverage plan continue to rise rapidly.

“The Biden admin gave BILLIONS of taxpayer money DIRECTLY to Big Insurance Companies. This is unacceptable. We are stabilizing the market so this bailout is no longer needed,” Centers for Medicare and Medicaid Administrator Mehmet Oz, referring to the Premium Stabilization Demonstration program, posted on social media.

“Premiums will go up by less than $10 for most Medicare recipients, with many even seeing LOWER premiums,” Oz claimed. “Every Medicare beneficiary still has access to low-cost plans, and we will continue to lower prescription drug prices for every American patient.”

The announcement comes as the Congressional Budget Office confirmed Wednesday that Medicare Part D will cost both beneficiaries and the federal government significantly more than expected, due to program changes enacted in the Inflation Reduction Act.

CBO had originally estimated that changes to Medicare Part D in Democrats’ 2022 law would reduce the federal deficit by $129 billion from 2022 to 2031.

Now, CBO estimates that Medicare prescription drug spending under the law will actually increase the federal deficit by about $700 billion.

“CBO highlighted how the problematic design of the Inflation Reduction Act (IRA) has not led to the savings CBO originally projected but has instead led to increased costs for taxpayers and instability in the Part D marketplace,” House Energy and Commerce Committee Chair Brett Guthrie, R-Ky., stated in response to the news.

“The Part D program is critical to meeting seniors’ needs and requires durable regulatory policies to ensure the long-term affordability and availability of prescription drug plans for these beneficiaries,” Guthrie added.

Among other changes, the IRA required HHS to negotiate prices directly with manufacturers for certain drugs, mandated drug manufacturers to pay Medicare if the price of their drugs outpaces inflation, and redesigned the program to limit premium increases and cap out-of-pocket costs.

The “smaller-than-expected price reductions” from negotiations and higher than expected spending on certain prescription drugs slashed the projected deficit savings. Rebate collections from drug manufacturers also proved to be minimal as inflation rose.

“Overall price inflation has increased more rapidly than CBO anticipated in 2022, which raised the benchmarks CMS uses to calculate manufacturers’ inflation rebates,” CBO explained. “That, in turn, lowered the amount of inflation rebates owed to Medicare and curtailed manufacturers’ incentives to limit price increases.”

The office also admitted that it “significantly underestimated the increase in per-enrollee costs” from the IRA’s drug pricing program redesign.

“CBO expected the redesign to shift some of the costs of prescription drugs from Part D enrollees to their prescription drug plans, resulting in higher bids from private insurers,” CBO wrote.

“Bids from Part D prescription drug plans have been higher than CBO expected earlier and the budgetary costs have been much larger than originally estimated…the redesign was the leading driver of those higher bids.”

As a result, CBO anticipates Medicare Part D enrollees will face a 35% total increase in annual costs for 2026, drastically higher than the 5% increase it originally predicted.

“We have once again confirmed that Democrats, with CBO’s analysis in hand, sold the American people a false bill of goods in the Inflation Reduction Act,” House Budget Committee Chairman Jodey Arrington, R-Texas, stated Wednesday.

“Combined with the Joint Committee on Taxation’s $600 billion miscalculation of the cost of the Green New Deal tax credits, we now know the IRA cost Americans $1.3 trillion more in new deficit spending. Today, taxpayers are left holding the bag due to Democrats’ failed experiment.”